Blandin Foundation alleges Wells Fargo mismanaged trust, asks court to step in

GRAND RAPIDS — The Blandin Foundation is asking a Ramsey County judge to address what it considers mismanagement of its investments by Wells Fargo.

In a petition filed Tuesday, April 21, the Grand Rapids-based foundation says Wells Fargo has retained one of the bank’s affiliates as an outside chief investment officer, or OCIO.

The foundation argues that this constitutes a conflict of interest under Minnesota law. The filing also says Wells Fargo has charged excess fees, has been unwilling to consider an alternative investment manager and that the trust has been significantly underperforming.

The foundation says the arrangement has been a "notable windfall" for Wells Fargo, and it has $6.5 million less coming in each year as a result of the underperformance.

Blandin said neither direct discussions nor voluntary mediation has resolved its concerns. The foundation is asking the judge to remove or replace Wells Fargo as the trustee or, alternatively, order a competitive, independent third-party investment manager selection process.

Wells Fargo has not responded to the filing as of Friday.

A hearing on the issue is set for June 17.

"For 85 years, the Blandin Foundation has addressed rural challenges and empowered resiliency, resourcefulness, and long-term sustainability in the Grand Rapids area and other rural communities," the foundation said in a statement.

" ... The needs of rural communities have never been more urgent. We must do everything we can to maximize our impact, and so the Foundation is seeking court assistance to address some of these concerns. This is a necessary step for the Blandin Foundation to sustain our community-centered work in the Grand Rapids area and rural Minnesota for generations to come."

Brief history of the Blandin Foundation trust

Blandin Paper Co. owner Charles K. Blandin started the Blandin Foundation in 1941. He died in 1958, and his will created a trust to fund the foundation.

He named Northwestern National Bank and Trust Co. of Minneapolis as the corporate trustee, meaning it managed the trust. In 1998, Wells Fargo acquired Northwestern and became a trustee.

The trust has roughly $475 million invested, according to the Blandin Foundation's filing.

The foundation says Wells Fargo's retention of its affiliate as OCIO creates a conflict between its fiduciary duty as trustee to act in the trust's best interest and its financial interest in retaining the OCIO.

Since 2018, Wells Fargo has received over $1 million a year for managing the trust, according to the filing. By comparison, in 1977, Northwestern made around $180,000, when adjusted for inflation.

In the filing, Blandin says over the last three years, the trust has not met its performance benchmarks, and its purchasing power is declining. It says the level of underperformance is not sustainable.

Blandin estimates the trust would have $129 million more today if Wells Fargo had met its benchmarks since it became a trustee.

The foundation separately manages $60 million in assets that were also managed by Wells Fargo's OCIO until 2022, when it selected a new investment manager due to concerns with management.

"At the time, the Wells Fargo executive in charge of the Foundation's accounts told the Foundation, 'I would have left and found a new OCIO as well,'" Blandin's filing states.

"In contrast to Wells Fargo, the Foundation has met or exceeded its benchmark since moving its assets from Wells Fargo in April 2022."

The Blandin Foundation is a financial supporter of KAXE News but does not influence the newsroom’s editorial process.